IBM’s big bet on a future with ‘big data’

What is Big Data worth? News that IBM had acquired the digital assets of the Weather Company for $2 billion (Dh7.34 billion) is — so to speak — one data point.

Like Monsanto’s purchase of a similar company, Climate Corporation, for nearly $1 billion two years ago, the deal provides a graphic demonstration of the new data economy that is taking shape.

Whole classes of information — in this case, detailed local data about, and forecasts of, weather conditions — may now be applied to everything from making more effective business decisions to providing better local services.

But the data sources alone, or even the technology platforms that are being built to collect, collate and analyse them, are only ingredients. With deals like these, the real test lies in the uses to which the new data substrate will be put.

And that makes it about people: specifically, the people who can identify new needs and turn them into applications that mostly have not been dreamt of yet.

IBM’s Weather Co deal stands in stark contrast to news of the company’s weak quarterly earnings. Those were a reminder that the “old” IBM, like much of the existing IT industry, is slowly dying.

Buying Weather Co shows how the pieces are being put in place for a new industry, even if it will take time for the revenues to become meaningful. It is one of the two biggest deals from IBM in the past seven years, matching its 2013 acquisition of SoftLayer, a key piece of cloud-computing infrastructure.

Monsanto’s aim was to sell Climate Corp’s data to farmers so they could increase crop yields. For its part, the Weather Co already supplies information to airlines and utilities, the types of company that have a critical interest in knowing where and when extreme conditions will occur.

IBM hopes that its deeper roots in the digital economy will greatly extend the uses. A large slice of commerce — to the tune of $500 billion (Dh1.83 trillion) a year, according to IBM — is heavily dependent on the weather.

Much of the Weather Co’s information is pulled together from public sources. This is supplemented by proprietary data sets, such as the barometric pressure readings from 40 million smartphone users who have opted in to the company’s app.

Companies that can tap into the data emanating from such smartphone networks have become a valuable resource. Waze, the traffic app acquired by Google for about $1 billion in 2013, collects its information from millions of smartphone users who are signed into the service.

Such data are only as valuable as the applications they can support. Traffic and mapping information is quickly coming to assume a significant place in the automotive world, first to support ride-hailing services like Uber but, more significantly, as a platform for autonomous vehicles.

If the application exists, the company with the best data wins. Thanks to the highly detailed maps it assembles from cars travelling on streets near its headquarters, Google’s driverless vehicles already move confidently around the streets of Silicon Valley, almost as though they were running on invisible tracks.

Without those kind of data, it will be hard to be a contender in the driverless future. No wonder a group of German carmakers is prepared to pay $2.8 billion for Nokia’s mapping service, Here.

For its part, Google is still largely a closed system, using its infrastructure, data and analytics to support its own “killer apps”. It has not come up with anything yet to rival internet search, although initiatives such as the driverless car could turn out to be equally significant.

But, for IBM, success will come from drawing in other developers. It is the strength of the ecosystems it builds around its new data platforms that really matters, says Daryl Plummer, a vice-president at research firm Gartner.

Few will question IBM’s credentials. It has the technology, including, with Watson, some of the most advanced artificial intelligence capabilities (what it prefers to call “cognitive computing”). But, as Plummer puts it: does it have the heart?

To put it another way: can it attract and inspire developers to dream up data-driven apps to change the world? And can it put itself at the centre of the new “smart” ecosystems being built around cities, industries and communities?

It is a cultural question as much as a technological one. IBM is not alone in facing it. From General Electric, with its ambition to build an industrial “internet of things”, to Amazon, with its big early lead in cloud computing, companies from very different backgrounds are converging on the same point.

It is shaping up to be an intriguing fight.

— Financial Times